03 March 2015

A Closer Look at the Nationals' Letter

Earlier in February, the Nationals sent a letter to the
court requesting that MASN pay them the difference between the RSDC decision
and MASN's proposal for 2014 as well as the first payments of 2015. The
Nationals argue that a ruling for this case was supposed to be issued in
December 2014 but won’t be issued until May 2015 at
the earliest. This is a considerably longer period than initially envisioned
and therefore the Nationals feel that they should receive the amount of money
specified in the RSDC decision for 2014 as well as any right payments owed in
2015 before a decision is tendered.

What I found interesting about their letter was the
following paragraph:

While MASN and the Orioles have insinuated that there was
something nefarious about the $25 million payment that MLB made to the
Nationals in August 2013, the new documents show the Orioles knew of this
payment all along – and that it was part of the plan to avoid any release of
the RSDC’s Award. The payment was meant to get the Nationals to the negotiating
table as the Orioles wanted.

See Bishop Aff. Ex. 5 (Doc. No. 549), at -004.

Bishop Aff. Ex. 5 (Doc. No. 549) at -004 consists of two e-mails
sent on March 30, 2014. One of these e-mails is from Rob Manfred sent to Alan
Rifkin, which in part discusses the $25 million dollar payment. The second
e-mail is from Alan Rifkin (MASN lawyer) sent to Rob Manfred that also
in part discusses this payment. The Nationals argue that this is proof that the
Orioles knew of this payment “all along.”

Alan Rifkin argues on behalf of MASN in these twoaffidavits that he didn’t know important facts about the loan until many months
after MLB and the Nationals entered into a written agreement. These facts include the actual amount, that MLB and the Nationals agreed that MLB would recoup its payment via MASN, and that if MASN was sold MLB wouldn't approve a sale unless MASN agreed to pay MLB $25 million.

I believe that by
building a timeline with all of the relevant e-mails it is possible to
determine the validity of each sides’ claims.

July 2, 2013: Ted
Lerner sent Bud Selig a letter stating that it had been nearly 15 months since
this matter was originally addressed by the RSDC without a resolution demanding a final decision
by July 17, 2013. If the Nationals weren’t going to receive the $590
million in media rights fees from 2012-2016 that they requested, then
they wanted the larger media rights fees proposed by the RSDC.

July 26, 2013:
Rob Manfred sent Alan Rifkin an e-mail stating that MLB determined the Nationals
deserved roughly an extra $7.5 million in distributions for 2012. A few hours
later that day, Alan Rifkin sent Rob Manfred an e-mail stating that Peter
Angelos rejected MLB's settlement proposal for a 2012 recalculation. Angelos
felt that MASN paid everything that they owed and was unwilling to pay anything
more.

MLB was trying to convince MASN to pay the Nationals an
extra distribution for 2012 in order to show the Nationals that progress was
being made and that the Nationals should be patient for longer while MLB and
MASN tried to find a long-term solution. MLB felt that the Nationals deserved something at this point.

August 25, 2013: It
became clear that MASN was not going to pay the Nationals any extra
distributions. Rob Manfred conceded this fact in an e-mail to Alan Rifkin where
he stated that he will not ask Peter Angelos for the $7.5 million previously discussed.
Instead, Manfred stated that he found another way to resolve 2012 and 2013 to
allow them to move forward. Manfred did request that MASN would pay the Nationals
the equity distribution amount for 2013 based on MASN's proposal no later than
March 15, 2014. MASN agreed to this request later that day.

August 26, 2013:
MLB sent the Washington Nationals a letter stating that the Commissioner’s
office will send the Nationals roughly $25 million to make up the difference
between the RSDC proposed decision and the actual amount paid by MASN. In
return for this, the Nationals would have to agree to repay this amount from
any extra money received from MASN for 2012 and 2013. Alternatively, the
Nationals would understand that MLB would not approve a deal where MASN was
sold to Comcast unless either MASN or Comcast agreed to repay the $24.5
million.

If the Nationals did not receive any extra money for 2012 or 2013 then this document makes it clear that the Nationals will not have to repay this
$24.5 million. If MASN wins this court case and Bortz is established as the
acceptable methodology, then the Nationals will not have to give MLB any money
and MLB will be forced to eat the loss.

These e-mails explain why Alan Rifkin was confused about the
entire amount. MLB told Rifkin that they wouldn’t ask MASN for $7.5 million
while agreeing to pay the Nationals $25 million. Likewise, there is no
documentation proving that Manfred told Rifkin that MLB would expect to be repaid
via either a sale of MASN or extra payments from MASN to the Nationals for
either 2012 or 2013.

Late 2013: Rifkin
claims that he learned at this time that MLB paid the
Nationals $25 million rather than $7.5 million. Needless to say, at this point
MLB and the Nationals had already come to an agreement and there was nothing he
could do about it.

Late March 2014:
Rifkin claims that Manfred told him that MLB didn’t give the
Nationals the money but had in fact borrowed it from a third-party lender that
wanted their money back. Rifkin wasn’t happy. He didn’t feel that the Nationals
deserved any extra money and therefore didn’t think that MLB should make extra
payments. It is one thing to give someone some money
and quite another thing to borrow in order to give someone money.

March 30, 2014: Manfred
sends Rifkin an e-mail stating that MLB has paid $25 million up till this point
to keep the Nationals happy and therefore wants MASN to pay $10.6 million for
2014. MLB felt that if MASN wanted more time to reach a deal and
therefore prevent the issuance of the RSDC opinion that they would need to
cover the excess between the RSDC opinion and Bortz for 2014.

March 31, 2014:
Manfred told Rifkin that the terms of the deal with the Nationals stated that
there were two routes to recover their $25 million. The first was via a sale of
MASN and the second was from payment out of additional MASN payments due to the
issuance of an RSDC opinion. If the current RSDC opinion was published then MLB
would get its money back but otherwise it wouldn't.

These e-mails sent on March 30 and 31, 2014, are what the
Nationals quote in their letter as an attempt to prove that MASN knew about the conditions of
the $25 million dollar payment “all along.” Rifkin argues that he didn’t learn
the full details about the $25 million dollar payment until March 30 and 31,
2014, despite the fact that MLB sent the Nationals a letter on August 26, 2013. This
is more than half a year after the deal was made and easily too late to make
any protests. I would argue that knowing “all along” about the conditions of the
payment would mean learning about them in either July or August 2013 when MASN
could take some action or at least protest.

I do believe that both MASN's reaction as well as MLB's
decision do make sense. Certainly, it makes sense for MASN to be unhappy that
MLB took out a loan to pay the Nationals money with the condition that MASN
ultimately is responsible to pay MLB back without MASN's consent or knowledge.

However, it
also seems likely that MLB's only other option was to issue the RSDC decision. If MLB did
issue this decision then MASN would be responsible to pay the $25 million for
2012 and 2013 as well as the extra amounts for 2014-2016. MASN would also
suffer from an adverse precedent and would be in a weaker bargaining position
in the future. One could quite credibly argue that MLB thought it was doing
MASN a favor even if it was done in a bizarre way. It also seems clear that MLB didn't believe that the RSDC's established methodology was Bortz despite MASN's claims to the contrary. The RSDC was unwilling to use Bortz unless MASN would make enough concessions to satisfy the Nationals. In hindsight, that probably wasn't possible.

In response to the Nationals' letter, MASN requested that
they be allowed to write a reply letter responding to each of the Nationals' points in detail. The Nationals asked the court to refuse this request. Part of
their reasoning was doubtless due to the fact that they want the court to make
a quick decision and allowing detailed reply letters would simply make
things take longer. But part of the reasoning could be that the
Nationals were afraid of what MASN could write in a reply letter discussing
each of their points. Suppose MASN was able to respond and they could write a
document like this putting this claim in context.

Anonymous, it would be great if your voice contributed more to this conversation as opposed to coming off as message board antagonism without much explanation. I come here because readers typically are thoughtful and respectful. You may have worthwhile thoughts, but you do not express them. You certainly are not respectful at all. I guess if you find enjoyment raging for 15 seconds in a comment useful, maybe it means one less road rage accident in the world, but it makes the comments section pretty worthless.

I don't know this litigation, so I am filling in blanks a little bit. Judges ordinarily receive arguments in writing from the disputing parties in what is called "briefing." Sometimes they are in "briefs," but sometimes judges accept what are "letter briefs" instead.

There is an ordinary course for an opening by one party, a response by the opponent, and a reply by the party in support of its request that is limited to addressing the response but not arguing new points. Sometimes parties ask for further opportunities if they feel that new issues were raised when they should not have been. Judges have a couple of options there. First, they could ignore the new issues or even strike the non-compliant brief in its entirety. Second, they could accept a "sur-response" to address new issues raised in a "reply."

As you can imagine, a party that has raised a "new" issue too late opposes the other guy getting a word in.

Bonding is a whole different thing. In the criminal arena, the whole point of a bond is for the defendant to show up for trial. It is different in civil (non-criminal) litigation. Civil litigation is disputes between private people about money (usually). So bonding is used when the judge rules in favor of one party temporarily but is afraid he might be wrong. In order to be sure to make the temporarily losing party whole should that turn out to be true, the judge has the temporarily winning party post a bond that goes to the temporarily losing party if after fuller consideration the judge changes his mind, or he is reversed on appeal, or events turn out differently than the judge guessed (such as a different litigation).

That way, the temporarily losing party knows that it is ok in the long run.

@Erik - I think Anonymous is right about what will happen. That's why I wrote very little about the letter itself and the possible legal action. As he said, it's a "tempest in a teapot".

What I found interesting was their claim that MASN knew about the debt "all along". While "all along" is a very imprecise language, I thought it was worth building a timeline discussing what MASN knew at the time.

That's why I focused most of this post precisely on that claim. In other words, I simply wanted to focus on the validity of that single claim and less about the implications of the letter itself.

The good folks at Federal Baseball are lawyers and do a pretty good job discussing the legal aspects of the MASN case. For the most part, I'm happy to leave that to them.

@Steve - Your feedback is helpful. Anonymous is a Nationals fan that isn't happy to learn that certain things he thought were true are in fact incorrect. Therefore, he doesn't really care whether the message board on an Orioles blog is respectful. But if people are being upset by his behavior then that's something helpful to know.

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